Coking coal jumps on China imports

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

29 Nov 2009

A huge increase in imports by China, particularly from Australia has seen a spurt in coking coal prices. Spot prices of the commodity are ruling around $175 per tonne at present, compared to around $145 a tonne in August. And prices are expected to rise further, with analysts predicting $200 levels by 2011. If that happens, it could be a double whammy for Indian steelmakers. Rising prices of coking coal could add to their woes of low prices of steel ruling at present.
An Indian steel producer, on condition of anonymity, told DNA Money, “We’ve been seeing this trend for the last few months as a lot of Australian coking coal is being exported to China. The Chinese buying is cause for concern. We can just hope that the trend is unlikely to sustain if many of the closed mines in China come back into operation.” Arun Jagatramka, chairman, Gujarat NRE Coke, one of the largest coke producers in the country, told DNA Money, “China for the first time has become a net importer, which is having its impact globally on the prevailing short supply of good quality hard coking coal thereby causing a spiralling effect on international prices.”
Jagatramka said there are two reasons for China’s purchases. The first is the consecutive mine disasters that have occurred in recent past, which have shut down production.
Second, though China has huge resource of coal, there are constraints in quality.
Trade estimates suggest China’s coking coal imports between January and October increased to over 95 million tonnes, a more than 170% increase over the corresponding period the previous year. On the other hand, coal exports from China have decreased by over 50% over the year.
Dipesh Dipu, principal consultant, Pricewaterhouse Coopers, said, “Chinese buying of coking coal would definitely impact spot prices. Once prices go up, steelmakers would face increasing costs of production. It would then depend on whether steelmakers absorb the prices or pass it on to the customer.”
Dipu said that prices of coking coal could go up to “$210-220 levels if the trend continues”, and that “it could be a cause of worry to steel manufacturers who depend much on imported coal”.
“Coking coal is one of the very few commodities whose prices were not affected by the recession. Ignoring last year’s windfall, the present price is highest ever in history,” Jagatramka said. Prices had shot up to $300 a tonne in 2008.
A recent report of Citi Investment Research & Analysis said that global coking coal prices are expected to harden further and reach $200 a tonne in 2010-11. The semi-soft variety of coking coal is projected at $120 a tonne, up from $100 a tonne. Driven by Chinese imports, prices of the sea-borne variety of coking coal have also increased to $160-170 tonne from $130 a tonne a few months back.

Source: DNAIndia